LibraryKYC hubKYC NewsBiden and FinCEN aim to combat corruption with AML legislation

Biden and FinCEN aim to combat corruption with AML legislation

In an effort to root out corruption, the Biden administration plans to issue regulations that will improve transparency in regard to beneficial ownership and real estate transactions.

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June 8, 2022

At the close of 2021, the Biden administration announced its comprehensive U.S. Strategy on Countering Corruption. This strategy emphasized two key enforcement priorities: anti-corruption and anti-money laundering.

In an effort to root out corruption, the Biden administration plans to issue regulations that will improve transparency in regard to beneficial ownership and real estate transactions. In addition to this, new regulations will also increase the obligations of gatekeepers, strengthen collaboration between law enforcement agencies and grant new powers to lawmakers.

Biden and FinCEN aim for increased transparency

The U.S. Strategy on Countering Corruption lays out several areas that would benefit from increased regulation. Specifically, the U.S. government wants to “identify bad actors hiding behind opaque corporate structures” like shell companies, which are a favored vehicle for corruption-related money laundering. 

On top of this, the strategy also discusses how the art and antiques markets have been exploited by corrupt actors, as well as the corruption risks posed by digital assets.

Alongside the U.S. Strategy on Countering Corruption, FinCEN is currently creating a beneficial ownership registry. Although this will exempt some entities in heavily regulated industries, it will apply to most corporate entities and will be an important tool in helping fight corruption.   

Notably, on the same day the Biden strategy was announced, FinCEN announced that it may expand reporting requirements to other parties, including real estate developers, managers, lenders, investment advisers, and investment companies.

Gatekeepers will have additional AML reporting obligations

The U.S. Strategy on Countering Corruption will increase the obligations of gatekeepers to the financial system, including lawyers, accountants and trust and company service providers.

Historically, these gatekeepers have not been held accountable for facilitating transactions that mask illicit funds. This is because previous regulations have not required gatekeepers to understand the nature and source of their clients’ funds. However, this is now set to change.  

Going forward, gatekeepers will likely be subjected to expanded reporting requirements and greater accountability. This will be achieved through more legislation and the creation of personal sanctions.

Greater collaboration is required to fight corruption

Although most of the U.S. Strategy on Countering Corruption addresses corruption in the United States, the strategy also makes it clear that greater cooperation is required between the U.S. and its partner countries in order to strengthen anti-money laundering processes.

The Anti-Money Laundering Act of 2020 (AMLA) is already facilitating this process, and collaborative law enforcement in relation to anti-money laundering looks set to be a key trend of the 2020s.

In addition to this, the strategy also raises the specter of increased enforcement. As well as the investigative tools provided by AMLA, increased transparency in financial transactions and enhanced reporting requirements for gatekeepers will result in a greater breadth of information that law enforcement can use to investigate and root out bad actors.

Although the U.S. Strategy on Countering Corruption is not the first document to publicly highlight how anti-money laundering is an important tool in fighting corruption, it does show us that the Biden administration is committed to both combating corruption and increasing the prosecution of money laundering offenses. As a result, gatekeepers to the financial system should be prepared for increased regulation.

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